The Confidential

The ACC Sports Blog

Is ESPN’s Greed Causing it to Lose Profit?

Frank the Tank has a new article up on the Catholic 7’s new television deal showing that basketball has more value in expansion than previously thought.  The Confidential does not disagree.  However, with Fox offering big money for a basketball-only product–and taking that product away from ESPN–it is just the latest example of ESPN’s greed causing it to lose profit.  What this also shows is that ESPN made a killing off its undervalued contract with the Big East and is making another killing off of the ACC contract.

Think about it.  If the Catholic 7 collectively have a fair market value of $3M apiece–that is $21M right there.  TCU, Syracuse, Pitt, West Virginia, Rutgers, and Louisville have values of approximately $18M apiece–given that they were accepted into conferences that needed roughly that (more for TCU/Rutgers/WVU) to break even.  So that is $108M.  Figure ND is worth $6M for its non-football stuff… that is $135M ($21M + $108 + $6M).  And then you still have UConn, USF, and Cincinnati.  Even at $25M total for the three schools, that is $160M.

For that collection of schools, ESPN offered $11M per football school–or $99M/year.  With the hoops schools getting a few million apiece, that is another $20M tops.  So $120M.  $40M less than what the schools ultimately proved to be worth individually.  At the very least.

In the end, ESPN ends up with UConn, USF, Cincinnati, and fodder.  So much for that extra value.  By trying to profit as much as possible off the Big East, ESPN ended up losing most of it.

Sort of.  Some of it went to the ACC, which is also under ESPN’s control.

For now.

Regardless of the veracity of any rumors, there are vultures circling the ACC to see IF it is a carcass.

So the interesting issue is whether ESPN will lose its ACC golden goose also.  Viewed separately, all but a handful of ACC schools are desired by the Big XII, SEC, and Big 10.  Viewed conservatively, BC, Pitt, Syracuse, and Wake Forest are “stuck” in the ACC.  An argument could be made that BC, Pitt, and Syracuse might have value to the Big XII as part of a NE wing with WVU.  Interesting thought.  But let’s assume not.  If conferences making $20M/year (minimum) can find a revenue BOOST in adding the other 10 ACC schools, that must mean that those schools are worth at least $22M apiece or $220M.  Assuming the remaining 4 are worth $11M apiece (50%), that is $264M total.  Minimum.  It is probably much higher.

Well, ESPN is paying an average of $240M per year.  Less extra profit than with the Big East, but still a nice 10% premium above the bare minimum numbers discussed above.

The question this time is whether ESPN will allow the ACC–in its current form–to walk out the door.  For every ACC school that leaves for somewhere other than the SEC, ESPN becomes less relevant and Fox becomes more relevant on the college sports scene.  At some point, ESPN has to protect its place in the college sports game.  It wants to start an SEC Network, not become the SEC Network.  Right?  But, given what has happened at many major corporations, one can never underestimate the stupidity of an organization.  10 years from now ESPN’s college programming might be down to the SEC and 10 different shows where reporters yell at each other about college sports.  Or ESPN could end up overbidding on the Big XII or Big 10 because they put themselves into a desperate situation.  Who knows?

But it does seem like ESPN could save itself a lot of trouble by locking up the ACC.  That gives the network good football and great basketball.  Programming from September to March.  At the very least, something to keep it on pace with Fox.


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5 thoughts on “Is ESPN’s Greed Causing it to Lose Profit?

  1. Once again, you are all over it (IMHO). Will ESPN defend its golden goose, or will the Giant let Jack steal it from him?

    BTW: I would add that ACC baseball is also world-class, giving ESPN something to show between basketball and football as well…

  2. Spot on man. ESPN has to realize that if it doesn’t pay fair market price, it won’t have a product at all. The field is just too competitive. ACC football is on the way up, and UNC, Duke, NC State, Syracuse, Notre Dame, Louisville, Pittsburgh, Virginia, etc. should get like 5x the money of the new Big East for basketball alone.

  3. Philip on said:

    Been saying this regularly. The ACC has good leverage on ESPN, with Fox crowding ESPN out of the Midwest and most of the West. The pitch is easy – get us over $20 million per team and help us establish an ACC network, or the Big 12, Big 10, and the SEC pick us apart like vultures over 7-day old carrion. Saturday and Sunday baseball, lacrosse, and soccer with the occasional Thursday night game is not a bad idea either. Swofford should also try to get the deal to terminate so that the ACC isn’t the first conference to re-negotiate.

    • Good points…it is up to ESPN…and unfortunately it has not shown the love to ACC it should…short term dollar profit for nothing down the road is really a poor strategy..c’mon ESPN, if the Catholic 7 are worth 3
      $3-$5Million a year each…certainly the ACC is worth more for bball not including soccer, baseball, and lax….give ACC $24-$27 million and do it quick…or you have lost another golden apple.

  4. Not to be redundant, but I agree with pretty much all of the above. ESPN may be about to make the biggest mistake they possibly could by letting the ACC evaporate. Surely somebody at the network knows it? Do they have something up their sleeve or is that giving them too much credit?

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